US: Canada: Expectations Low For Breakthroughs During Trump-Carney Meeting
Canadian Prime Minister Mark Carney is due to arrive at the White House shortly for a third in-person meeting with US President Donald Trump. The pair will hold a bilateral meeting and working lunch. There is no join press conference scheduled, but reporters are likely to be admitted into the Oval Office for questions at the top of the visit.
- The meeting comes shortly after Washington and Ottawa launched mandated consultations ahead of next summer’s deadline to renegotiate the United States-Mexico-Canada Agreement. While Ottawa has been subject to a raft of Trump’s national security/sectoral tariffs, the USMCA has ensured Canada’s effective tariff rate remains relatively low. The Financial Post noted last month, “a bit more than 90 per cent of Canadian products are entering the US [tariff] free.”
- CBC noted, “there is clear and obvious pressure on [Carney] to secure some kind of deal. But pressure is growing on the Trump administration as well. American farmers are clamouring for bailouts, bourbon producers are pushing for tariff relief and automakers are asking for a break of their own.”
- The New York Times notes, “Canadian officials remained largely silent before leaving for Washington, and people in the industries most affected by [Trump’s] trade war said they had little expectation of any significant breakthroughs.”
- Chris Sand at Johns Hopkins University said: "My hypothesis has been that a USMCA truce would be politically shrewd ahead of the November 2026 midterms. It would end the trade war with the two biggest U.S. trade partners and stabilize prices and create conditions for business investment."
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LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
LOOK AHEAD: US Macro: Payrolls Preliminary Benchmark Revisions (Tue)
- The BLS on Tuesday will publish preliminary estimates of benchmark revisions, based off QCEW data for Q1.
- These will give an indication of the actual benchmark revisions on the Mar 2025 level of payrolls due with the Jan 2026 payrolls report released in early February.
- Bear in mind that the final benchmark estimate tends to nearly always be more negative than the preliminary figure – see historical values to the right.
- That doesn’t mean they can’t be large again after last year’s historically negative revision that lowered the level of payrolls by ~600k. Initial estimates we’ve seen look for another large downward revision, with the smallest being worth -550k but with wide ranges higher.
FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
